Friday, January 22, 2010

FHA Mortgage Insurance is Going Up

The US Department of Housing and Urban Development (HUD), the government agency that oversees the FHA loan program, has recently announced that the up-front mortgage insurance premium that applies to FHA loans will be increasing from 1.75% of the loan amount to 2.25% of the loan amount. The change affects all FHA loans with an FHA case number assigned on or after April 15, 2010.

Although there will probably be an outcry against the change, it really has an extremely small effect on the borrower because almost all borrowers choose to finance the up-front mortgage insurance premium into their loan. For every $100,000 in loan amount, the monthly payment will go up by only $2.68 if the interest rate is 5%, and by only $2.84 if the interest rate is 5.5%. Hardly a deal killer.

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